Approximately 24 million individuals hold investments in £1 premium bonds, which are entered into a monthly prize draw offering tax-free winnings from £25 to £1 million. However, National Savings and Investments (NS&I), the government-backed savings institution, is facing criticism over failures and delays in tracing accounts belonging to deceased customers, compounding the stress for bereaved families.
Lengthy and Frustrating Process
Kate Constable described the ordeal of claiming £46,000 in premium bonds from her late mother as "more than a year of hell." The process was prolonged because NS&I requires probate for claims exceeding £5,000. The entire claim took 14 months, with probate alone taking nine months. Constable criticised NS&I for relying on paper-based correspondence, stating, "They only deal in paper… No one can tell you anything helpful." The funds were intended as inheritance for her father, who has Alzheimer's and resides in a care home, forcing the family to take out a loan to cover his fees.
Systemic Issues and Backlog
NS&I acknowledged long-standing problems with its search process for accounts of deceased customers, affecting 34,000 families and leaving £367 million unclaimed. The bank attributed the issues to a failure to identify all relevant NS&I products. Sir Jim Harra, a former HMRC chief, was appointed to resolve the situation and confirmed that a more thorough process introduced in early 2025 has fixed the search errors. However, he admitted that this new approach takes longer, resulting in delays. The response time for bereavement inquiries has increased from two weeks to eight weeks, with full settlement times varying by individual circumstances.
Bureaucratic Hurdles
Claimants must complete forms, provide account details, a death certificate, proof of identity, and potentially a grant of probate, which typically takes five weeks. NS&I's £5,000 threshold for requiring probate is significantly lower than that of major banks like Barclays and Hargreaves Lansdown, where the threshold is £50,000. Constable noted that the tracing issues exacerbated existing customer service problems. Premium bonds only participate in prize draws for one year after the owner's death, meaning holdings trapped in limbo earn no returns.
Historical Data Challenges
Experts suggest that paper-based bonds or accounts opened in the 1950s and 1960s may have been missed due to outdated records. Duncan Stevens, CEO of account tracing firm Gretel, described a "perfect storm" of old data, historic system migrations, and high proof burdens. He noted that NS&I's records, spanning over 160 years, have moved through multiple systems, leading to incomplete or incorrect information. Families may be asked to prove ownership of accounts they were unaware of or lack documentation for.
Emotional Toll and Compensation
Constable found it particularly distressing to repeatedly provide the date of her mother's death as a security question, stating, "I must have had to say it 20 times." NS&I explained this is necessary for calculating interest and verification. Next week, staff will contact the first group of affected families, with payments expected shortly, but full resolution may take at least a year.
Peter, from Southport, who requested anonymity due to an ongoing complaint, contacted NS&I about five accounts belonging to his late father, totaling approximately £55,000. NS&I claimed none existed but identified one account with £12,000. After reading about tracing errors, Peter revisited statements and found that two accounts from 2015 and 2016 may have been closed, but others from 2023, 2024, and 2025 were likely valid. If all five accounts are valid, the total could exceed £60,000 including interest. Peter feared additional paperwork and legal fees due to inheritance tax, but the government confirmed that redress payments will be exempt from inheritance and income tax.
Constable reported that the money unexpectedly appeared in her father's account last week. She had previously complained and been offered £150 compensation on condition of providing evidence of her father's care home residence, which she refused. NS&I eventually waived the requirement and made the payment.
NS&I Apology and Remedial Actions
An NS&I spokesperson apologised to anyone making a bereavement claim who received inadequate service, acknowledging the sensitivity of the situation. The bank apologised for delays due to the backlog and has brought in extra staff to process claims, aiming to return to normal processing times by autumn 2026.
